Increased Attention on Compliance Comes At A Cost For Collection Agencies

The following is an article brought to you by Vertican Technologies, which offers a suite of products and services for collection agencies. Learn more about Vertican at www.vertican.com.

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Back when the Titanic was being built, the formula for determining how many lifeboats a ship needed was based on the weight of the ship. But the formula maxed out at 10,000 metric tons, which required a ship carry 16 lifeboats. The Titanic weighed 35,000 metric tons, but still only carried 16 lifeboats because that was all it was required to carry.

In the collections industry, as in the maritime industry, it can be easy to overlook simple decisions that ultimately lead to bigger problems down the line. In collections, there has been such an intense focus on compliance and making sure that everything an agent or agency does is done the right way, that other areas of the business are now being overlooked.

One of the key areas that may be overlooked, which is now getting a lot of attention is the compensation plans for collectors. Wells Fargo was recently fined more than $185 million after employees were found to be creating phony accounts in customers’ names because of a sales program that rewarded how many accounts were opened. After the program was exposed, 5,300 employees were let go.

 

COMPENSATION POLICIES OVERLOOKED

Many collection agencies are basing their compensation plans on production, and that can lead to problems.

“The impact on the customer experience of agent compensation, I believe is significant and something that is overlooked by collectors because collectors don’t always appreciate the impact that agent compensation has on the customer experience,” said John Bedard, a lawyer with the Bedard Law Group. The million-dollar question is how do you compensate them? My answer is to imagine two different phone calls. One is a call that is happening right now at an agency. Think of the tone of that call. Now, think of a different call, where the compensation is based on a satisfaction survey that the customer completes at end of the call. If the tone of the second call is different, then your compensation policy is driving behavior in ways you don’t know about. The agency needs to decide what behavior it wants and then compensate for that behavior.”

The behavior of collectors is incredibly important, because that is a very important factor in determining how much money a collection agency is bringing in. And, at the end of the day, how much money a collection agency brings in is going to determine how long that agency stays in business.

This doesn’t mean that agencies need to lose sight of the importance of compliance. How compliant an agency is will also have an impact on how long it stays in business, too. But it can be hard for agencies to remember that they are businesses, and businesses need to be more than just compliant.

“As much as the industry is spending on compliance, they have to make it back by using technology and other advancements,” said Michael Lamm, a managing partner at Corporate Advisory Solutions, an advisor and consultancy to collection agencies. “It’s going to take thought leaders in this space to drive that. If we can engage those thought leaders in what they are doing to move the industry forward and not stand still, the industry can make more profits and use what they have more efficiently.”

 

LOSING SIGHT OF TECHNIQUE & STRATEGY

Making more profits is too often being overlooked at collection agencies. Conversations between executives and collectors used to be about technique and strategy and now are more about what phone number was called and whether a voicemail was left.

“We used to be able to actually sit with our reps and show them how to collect and what they can do to increase recoveries through negotiating properly and projecting the proper attitude and approach,” said Bill Lindala, the director of operations at Federated Adjustment Company, a Wisconsin-based collection agency. “Now, we not only have to cut their call volume in some cases (TCPA concerns), but we also have to pick apart every word that is said, so they don’t draw a technical violation.”

There are bound to be icebergs in the water for any collection agency. Those icebergs can be new rules or regulations, or a legal ruling that impacts how an agency operates. But a collection agency needs to keep its motor running, its crew working hard to reach a destination, and not lose sight of the horizon as it navigates through the icebergs.

Again, a special thank you to Vertican for sponsoring this article series. Please visit them at www.vertican.com.

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